Hugo Angelo Lucien Manenti
Edited
Hi everyone, Thanks for the patience and the very civilised / relevant questions so far. I have been actively trading / researching / answering questions these last few days so I hope you’ll understand that it was difficult to write a very long update. It is also usually better to sit back a bit before opening one's mouth and saying something silly ;) 𝗠𝗔𝗥𝗞𝗘𝗧 𝗨𝗣𝗗𝗔𝗧𝗘 My view remains that this is a “normal” correction, with no need to panic / short / close your positions. As you probably know, this sort of 7-15% corrections happens pretty much every year. We had one in September 2021, one in March 2021, one in September-October 2020… and never panicked. My outlook remains exactly the same as presented last week: etoro.tw/33RLYuW Prices have changed a lot over the past month, but fundamentals haven't. What is causing this correction? A convergence of factors: - Fed tightening - Slight deceleration caused by Omicron - Geopolitical fears (Russia / Ukraine, China / Taiwan) - High cost of natural resources (oil, gas, copper, etc.) - 𝗦𝗘𝗡𝗧𝗜𝗠𝗘𝗡𝗧 and overcrowding / overvaluation in certain stocks My views are as follows: - Fed tightening will be gradual as inflation moderates - Strong rebound of growth in Q2-Q3 this year, as Omicron fades - Russia / Ukraine conflict unlikely to have a major impact globally - China unlikely to attack Taiwan anytime soon - Natural resources to remain relatively high Always remember that markets are unpredictable and NOT efficient. They are moved by sentiment, and sentiment can go from extreme highs to extreme lows very quickly. We Humans are emotional animals, and markets are a reflection of that. 𝗟𝗢𝗡𝗚 𝗧𝗘𝗥𝗠 𝗦𝗧𝗥𝗔𝗧𝗘𝗚𝗬 I have seen questions and complaints about the absence of hedging in the portfolio, or the fact that we are suffering more than main indices. Regarding 𝗵𝗲𝗱𝗴𝗶𝗻𝗴 – as per my pinned post, I only hedge in exceptional circumstances. That would be the Global Financial Crisis or the covid crash – drawdowns of over 30% caused by a very specific event or chain of events. These are once-in-a-decade situations. Other than that, hedging is a losers’ game. You do get lower volatility, but also lower returns. If you are in for the long term, volatility does not need to be a concern. We are indeed getting a larger 𝗱𝗿𝗮𝘄𝗱𝗼𝘄𝗻 than the main indices. Why is that? Simply put, I am bullish on the economy and on markets for the next 12 months, and I decided to increase the beta (= risk / volatility) of the portfolio. Which I have done over the month of January and is reflected in the drawdowns of today and last week. The reverse of the equation is that when markets bounce, we should outperform the indices. We’ll see who wins at the end of the year – I am pretty confident ;) I would sum it up that way - short term volatility is a price to pay for long term returns. You can't make an omelette without breaking eggs. I am yet to see a trader with the superpower to anticipate all or most corrections, and consistently outperform both on the downside and the upside. 𝗥𝗘𝗖𝗢𝗠𝗠𝗘𝗡𝗗𝗔𝗧𝗜𝗢𝗡 Baron Rothschild famously said “Buy when there's blood in the streets, even if the blood is your own”. Today I see blood. This may not be THE bottom yet, but should be very close. Between 4100 and 4300 for the $SPX500 is a great place to buy the dip, in my opinion. Add funds to your favourite PIs, buy more of your favourite undervalued stocks, whatever you prefer! Doing it in tranches is a great way to go. I bet that the SPX will see 5000 much earlier than most people expect. If the fundamentals change, or if we see a real breakdown in liquidity, I'll be first to let you know. So far, I really don't expect it. Please let me know if any questions. I am doing my best to answer each of you but there are a lot of notifications and it is hard to keep track. All the best, Hugo $SPX500 $NSDQ100
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